Scandals costly to Japan Inc
The latest Japanese corporate scandal, soon after Nissan’s vehicle recall, is a result of inexorable global competition, experts say
Embarrassing scandals at Kobe Steel and Nissan have tarnished the reputation of Japan Inc for quality as once mighty industrial world-beaters battle fierce global competition and shrinking profit margins.
Embarrassing scandals at Kobe Steel and Nissan have tarnished the reputation of Japan Inc for quality, as once-mighty industrial world-beaters battle fierce global competition and shrinking profit margins.
Once again, the image of a corporate boss bowing deeply in apology before the cameras has been splashed across Japan’s newspapers and has sparked a fresh bout of national soulsearching. Kobe Steel president and CEO Hiroya Kawasaki admitted his firm falsified quality data in products shipped to about 500 clients including car maker Toyota, aircraft manufacturers and defence contractors.
The news that the affected parts were also used in Japan’s Shinkansen bullet trains deepened the humiliation for the “Made in Japan” brand, which was once a byword for quality.
The disclosure wiped $1.8bn off the Kobe Steel share price last week — a drop of more than 40% — as the scandal deepened and widened to other products, such as steel wire, a key company product.
The Kobe Steel news came just days after Nissan recalled more than 1-million vehicles in Japan after admitting that staff without proper authorisation conducted final inspections before shipping cars to dealers.
“Once the Japanese way of manufacturing won the praise of the world. But now jobs are outsourced and factories are sent overseas. Things have changed,” said Koji Morioka, a professor emeritus at Kansai University.
Intensifying global competition and an unending drive to cut costs had resulted in a situation in developed countries where workers kept quiet to protect themselves even if they saw wrongdoing, added the expert.
“As globalisation continues, companies are expanding local production, and emerging economies are becoming ever more competitive,” Morioka said.
Experts say the global landscape is going through sweeping transformation. Costly workers in mature economies are directly pitted against cheap factory staff in emerging markets.
Experienced workers with stable contracts are being replaced by temporary novices, while management demands higher productivity from all.
Meanwhile, newcomers are taking market share from traditional corporate giants.
In steel making, Indian and Chinese giants have expanded, putting pressure on Japanese rivals. And Japanese car makers have expanded overseas production, rather than exporting vehicles from Japan.
Airbag maker Takata went bankrupt in 2017 after years of dealing with defective products that were linked to 16 deaths and scores of injuries worldwide.
In 2016, Mitsubishi Motors admitted that it had been falsifying mileage tests for years.
Sadayuki Sakakibara, the chairman of the powerful Keidanren business lobby, said that “global confidence and trust in Japanese manufacturing were based on unrivalled quality that overwhelmed other countries .... These acts were so serious that it could have an impact” on trust in Japanese manufacturing.
Corporate scandals are not limited to Japan. But analysts said that, ironically, super-stringent quality controls in Japan could be part of the problem.
Eyebrows were raised in the Nissan scandal when it emerged that checks by more qualified officials were required for the domestic market, but not for vehicles destined for exports.
Nobuo Gohara, a corporate compliance lawyer who has helped restore a number of firms after serious scandals, said many such affairs stemmed from excessive safety or quality standards. Misconduct began when employees thought meeting these standards was a mere formality, he said.